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U.S. Government Moves To Shut Down World's Biggest Online Poker Companies

Federal prosecutors today unsealed a sweeping indictment against Isai Scheinberg and Raymond Bitar, founders of the world’s biggest online poker companies, and moved to try to shut down their businesses.

The indictment filed by Preet Bharara, the U.S. Attorney in Manhattan, charges Scheinberg, the founder of PokerStars, and Bitar, the founder of Full Tilt Poker, as well as nine other individuals, accusing them of operating illegal gambling businesses. Federal prosecutors also filed a civil lawsuit seeking $3 billion in civil money laundering penalties, alleging the online poker companies disguised money they received from U.S. poker players as payments to online merchants selling jewelry and golf balls.

The U.S. Attorney in Manhattan moved to try to shut down the online poker business in America by seizing five Internet domain names, including pokerstars.com and fulltiltpoker.com, used by the three main companies facilitating online poker games in the U.S. In addition, a federal judge issued a restraining order against 76 bank accounts in 14 countries utilized by those online poker firms.

But in a 51-page indictment filed in federal court in Manhattan, federal prosecutors allege that PokerStars, Fullt Tilt Poker and Absolute Poker, “used fraudulent methods to avoid restrictions and to receive billions of dollars from United States residents who gambled.” The indictment largely focuses on financial transactions, claiming the online poker companies violated a 2006 law that Congress passed to cut off the flow of cash to online gambling companies, saying the firms “deceived or directed others to deceive United States banks and financial institutions into processing billions of dollars in payments.”

Offshore companies like PokerStars, based in the Isle of Man, and Full Tilt, which is run from Ireland, generate more than $1.4 billion in revenues in the U.S. online poker market. But for years they operated under the shadow of the Department of Justice, which took the position that online poker violated U.S. law. A lawyer for Full Tilt Poker’s Bitar described the cat and mouse game between the feds and the poker firms as “a guerrilla war” in a Forbes article one year ago that detailed the federal government’s actions in the online poker arena.

Federal agents arrested two men, Chad Elie, a payment processor, and John Campos, a part owner of a small bank, this morning in Las Vegas and Utah. Another payment processor, Bradley Franzen, is expected to appear for his arraignment in Manhattan next week. But a number of the indicted individuals, including Scheinberg and Bitar, are not in the U.S. and have not been arrested, potentially setting the stage for extradition battles. Two famous poker champions, Howard Lederer and Chris “Jesus” Ferguson, who have strong connections to Full Tilt Poker, were not named in the indictment.

Federal prosecutors claim that the men behind PokerStars, Full Tilt and Absolute Poker, relied on highly compensated payment processors who lied to U.S. banks about the nature of financial transactions they were processing. In the past, PokerStars has maintained that payment processors who got in trouble with law enforcement had hid information from the company.

In its court filing, however, the government claims the poker companies were working with the payment processors to deceive banks and financial institutions. For example, the feds say that Bitar worked to create fictitious companies, including phony online flower shops and pet supply stores, to help facilitate credit card transactions. The government alleges that Scheinberg helped develop pre-paid debit cards or phone cards that could be loaded with funds from a U.S. customer’s credit card without using a gambling transaction code. Legal documents and other circumstantial evidence suggest federal agents have been able to secure the cooperation of payment processors who have pleaded guilty during the government’s investigation.

“The key to the indictment is the bank fraud conspiracy charge. The factual basis for that charge includes the alleged misrepresentations about the nature of the transactions being processed, in effect, a cover-up,” says Kevin Di Gregory, a former federal prosecutor who is now a partner at Manatt, Phelps & Phillips. “The government will argue that whether poker was gambling is irrelevant to proving this charge, but that nevertheless the efforts to mask the transactions suggests the defendants knew the gambling activity behind them was illegal.”

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For most poker players this will be yet another minor inconvenience. Whether logging in through proxies or VPNs you can be sure that a game as American as apple pie won’t go away that easily. Maybe they will just drive to brick and mortar card rooms instead. At least with internet poker there is a chance to create a paper trail so that everything is taxable. When it comes to live games I sincerely doubt that many professional players report 100% of their income. Why do we force profitable forms of entertainment underground? It’s bad for the player and bad for the government. Once again only the house wins.

What ever happened to the American people having freedom? Why does the government want to treat citizens like children? It should be the consumers choice how they want to spend his money. What is the difference if a person wants to spend one hundered dollars a month on a poker site or one hundered dollars on a shirt and pair of jeans at American Eagle, a 50,000.car or a meal for two people at Red Lobster. Excessive spending should be the consumer’s choice. GOD GAVE ALL OF US “FREE WILL” God should be the one judging AMERICAN people. The Christians should not pass judgement on anyone..they are not GOD! As far as the Government, I have no choice but to pay taxes that is set by law, I would rather contribute my money by way of game of chance or skill playing poker..at least I have a chance of getting a return on my money! We need to vote all against FREEDOM of CHOICE , out of office..maybe they would see how hard it is to get along while UNEMPLOYED!

I do not feel strongly one way or the other about poker. What bothers me about this is that right now we have so many MORE IMPORTANT ISSUES to be focusing resources on. Why on earth is our tax money being spent to chase down these companies, why is that a priority right now? That is what upsets me.

Here it is you are under the control of your government DON”T FORGET IT, You are to buy over priced gas and drive to a real casino so the Uncle Sam gets his outragious taxes to buy more vacation homes and airplanes for thier officials to waiste your hard earned dollars on thier personal gains via wining and dining the Corperate community.

I think it highly hypocritical of “the U.S.” to attack these sites based on not co-operating with the “Spirit of the law”. Basically, we know that online poker – gambling or not – was never illegalized. So isn’t it the same thing, that the U.S. Government is not co-operating with “the spirit of the law” by actively looking for “other ways” to circumvent our rights? They are using this “bank transaction issue” – which is shutting down all of the online poker betting; but online poker betting is legal – so the U.S. is basically breaking the law.

Online poker betting was found to be something that the public decided was okay, so the government should support the people they represent. The only thing they should be doing is protecting the players – not stifling them. And taking advantage of this “loophole” is making the U.S. look very bad – because it is so obvious what they are doing (circumventing to force what they want, even though the public is not with them). Who is this person in the government who is behind this – let the coward come out and identify themselves and tell us why what they want is more important than want the citizen wants.

If gambling is illegal, why do we have casinos in Vegas, on riverboats? The only Why do we have state-run lottery all over the country? Does the government go to casino and seize people’s winning incomes? The only difference between online poker and poker in casinos is that one is played online, the other is not. The economy is not good, some people who have the poker skills play online poker to suppliment their incomes. I guess they just have to spend less on the economy now.

Is shutting down online poker sites another attempt to legislating morality by some politicians? The new government budget passed by the congress, mostly by the Repulicans have no sense of moral obligation to poor women and children, and to senior citizens who have made contribution to medicare throughout their lives. The inconsistency of what is happening in our government is puzzling, no, maddening!

You deem poker sites ripoffs?? Back it up moron! People have the right to make their own decisions, they can spend or make money playing poker online or not. Thousands of Americans make a lot of money from online poker…so how are they getting ripped off??

“Protection???” This is not protection. Perhaps you feel that fast-food should be deemed illigal by the government to protect its citizens from obiesity and othe health problems. Where does it end moron?